Tuesday, 30 April 2013

The Flaw that May Bring Down Bitcoin or Change it Forever

Bitcoin is currently being used as a publishing system due to a design feature/flaw. That flaw threatens the viability of Bitcoin as a currency.

How so?

Some folks have expoited that feature/flaw to publish Wikileaks cables and pedophile porn links in bitcoin's blockchain.

Of course, that's a problem. It may attact some aggressive behavior from governments, well before it reaches a maturation.

However, that's a problem. Since bitcoin is decentralized, the steps required to prevent people from publishing information.

This now becomes the multi-billion $$ question: can Bitcoin fix itself or will it end up becoming an illegal backwater?

To find out how it's done and what can actually be done about it, I contacted Jeff Garzik on the Bitcoin software team (it's a little technical, but you can follow the logic):

Sending bitcoins requires two pieces of data: a bitcoin address, and
an amount (number of bitcoins). There is no "comments field" or
anything of that nature. A bitcoin address is just a random 20-byte
piece of data. Normally those 20 bytes are derived from the RIPEMD160
and SHA256 algorithms, but a valid 20 bytes cannot be distinguished
from an invalid 20 bytes. Therefore, if you are willing to waste
money -- albeit very small fractions like 0.00000001 bitcoins -- by
sending that money to invalid bitcoin addresses, you essentially have
created a channel for random data transmission.
The bitcoin blockchain is in one sense a massively replicated ~7GB
database that stores data for all eternity.

There remains the open
question of what happens if somebody dumps data into the blockchain,
that a government finds illegal. Smart people argue the legal theory
"mens rea" and similar mitigating factors are applicable. But it
remains an unknown. The vast majority of people are burdened with
this awful data they don't care about, simply to use the bitcoin
payment system they do care about.
There are many conflicting motives and incentives (very Brave New War-ish):

Anarchist activists want to publish this information, to force
authorities to act (or not) when this illegal data is published.
*

Bitcoin activists want to publish this information, to force
developers (us) to address The Filter Issue

Some people see more value in bitcoin as "eternity data storage", if
expensive and inefficient, than bitcoin as a currency

It is, quite literally, impossible to prevent use of bitcoin as data
storage. It is a purely digital currency. Who can say which digits
are "evil" or "good", allowed or disallowed? You can detect certain
patterns, and possibly filter those

Many bitcoin users are using bitcoin for its intended purpose, as
currency transfer, and dislike carrying the costs for these other uses. As this carrying-data issue rears its head, it increases the costs
for anyone running a P2P node on the all-volunteer bitcoin P2P
network. This shrinks the total number of bitcoin P2P nodes. As such, due to both legal and resource-usage issues, "data spam"
has long been theorized as an attack vector.

The "Filter Issue":
There are very large ramifications to filtering out transactions, even
ones that are obviously data spam.
Fungability: currently, all bitcoins have the same value. My 1.0 BTC
and your 1.0 BTC are equivalent in value. Once you start filtering
transactions, you are injecting policy-based censorship into the mix.
Some bitcoins are accepted by all, some bitcoins are only accepted by
a few. A value of a bitcoin itself becomes a product of its ancestry.

If this policy is implemented, perhaps by court order to a bitcoin
mining pool, it could lead chain forks, where i.e. bitcoin users in
the United States see a different set of spendable bitcoins than users
outside the US.
It is widely speculated, based on common forum comments in the
crypto-anarchist community, that this current round of data spam is
intended to force bitcoin users, developers and governments of the
world to take action to censor -- or not -- certain bitcoin
transactions. Trying to force the issue, to establish a precedent one
way or the other. Or, more pessimistically, a party could be simply
trying to shut down bitcoin.

The bitcoin community is very staunchly anti-censorship, but if data
spam were to threaten the life of bitcoin, I imagine ideology-neutral
"it looks like data, not currency" filtering would appear. Bitcoin is
ultimately a product of voting -- you vote by choosing which software
version and software ruleset to download.
The users can always vote data spam off the island... but will they?
:) Is data transmission a valid use of bitcoin? The users themselves
choose the definition of "valid."

Comments

Bitcoin is currently being used as a publishing system due to a design feature/flaw. That flaw threatens the viability of Bitcoin as a currency.

How so?

Some folks have expoited that feature/flaw to publish Wikileaks cables and pedophile porn links in bitcoin's blockchain.

Of course, that's a problem. It may attact some aggressive behavior from governments, well before it reaches a maturation.

However, that's a problem. Since bitcoin is decentralized, the steps required to prevent people from publishing information.

This now becomes the multi-billion $$ question: can Bitcoin fix itself or will it end up becoming an illegal backwater?

To find out how it's done and what can actually be done about it, I contacted Jeff Garzik on the Bitcoin software team (it's a little technical, but you can follow the logic):

Sending bitcoins requires two pieces of data: a bitcoin address, and
an amount (number of bitcoins). There is no "comments field" or
anything of that nature. A bitcoin address is just a random 20-byte
piece of data. Normally those 20 bytes are derived from the RIPEMD160
and SHA256 algorithms, but a valid 20 bytes cannot be distinguished
from an invalid 20 bytes. Therefore, if you are willing to waste
money -- albeit very small fractions like 0.00000001 bitcoins -- by
sending that money to invalid bitcoin addresses, you essentially have
created a channel for random data transmission.
The bitcoin blockchain is in one sense a massively replicated ~7GB
database that stores data for all eternity.

There remains the open
question of what happens if somebody dumps data into the blockchain,
that a government finds illegal. Smart people argue the legal theory
"mens rea" and similar mitigating factors are applicable. But it
remains an unknown. The vast majority of people are burdened with
this awful data they don't care about, simply to use the bitcoin
payment system they do care about.
There are many conflicting motives and incentives (very Brave New War-ish):

Anarchist activists want to publish this information, to force
authorities to act (or not) when this illegal data is published.
*

Bitcoin activists want to publish this information, to force
developers (us) to address The Filter Issue

Some people see more value in bitcoin as "eternity data storage", if
expensive and inefficient, than bitcoin as a currency

It is, quite literally, impossible to prevent use of bitcoin as data
storage. It is a purely digital currency. Who can say which digits
are "evil" or "good", allowed or disallowed? You can detect certain
patterns, and possibly filter those

Many bitcoin users are using bitcoin for its intended purpose, as
currency transfer, and dislike carrying the costs for these other uses. As this carrying-data issue rears its head, it increases the costs
for anyone running a P2P node on the all-volunteer bitcoin P2P
network. This shrinks the total number of bitcoin P2P nodes. As such, due to both legal and resource-usage issues, "data spam"
has long been theorized as an attack vector.

The "Filter Issue":
There are very large ramifications to filtering out transactions, even
ones that are obviously data spam.
Fungability: currently, all bitcoins have the same value. My 1.0 BTC
and your 1.0 BTC are equivalent in value. Once you start filtering
transactions, you are injecting policy-based censorship into the mix.
Some bitcoins are accepted by all, some bitcoins are only accepted by
a few. A value of a bitcoin itself becomes a product of its ancestry.

If this policy is implemented, perhaps by court order to a bitcoin
mining pool, it could lead chain forks, where i.e. bitcoin users in
the United States see a different set of spendable bitcoins than users
outside the US.
It is widely speculated, based on common forum comments in the
crypto-anarchist community, that this current round of data spam is
intended to force bitcoin users, developers and governments of the
world to take action to censor -- or not -- certain bitcoin
transactions. Trying to force the issue, to establish a precedent one
way or the other. Or, more pessimistically, a party could be simply
trying to shut down bitcoin.

The bitcoin community is very staunchly anti-censorship, but if data
spam were to threaten the life of bitcoin, I imagine ideology-neutral
"it looks like data, not currency" filtering would appear. Bitcoin is
ultimately a product of voting -- you vote by choosing which software
version and software ruleset to download.
The users can always vote data spam off the island... but will they?
:) Is data transmission a valid use of bitcoin? The users themselves
choose the definition of "valid."

On Brave New War

G. Gordon Liddy Show (radio)...this is a seminal book in the truest sense of the term.. way ahead of the curve... go out and buy it right now -- G. Gordon Liddy

City JournalRobb has written an important book that every policymaker should read -- Glenn Reynolds (Instapundit)

Small Wars JournalWithout reservation Brave New War is for professional students of irregular warfare and for any citizen who wants to understand emerging trends and the dark potential of 4GW -- Frank Hoffman

Scripps Howard News ServiceA brilliant new book published by terrorism expert John Robb, titled "Brave New War," hit stores last month with virtually no fanfare. It deserves both significant attention and vigorous debate... - Thomas P.M. Barnett

Chet Richards DNIJohn has produced an important book that should help jar the United States and other legacy states out of their Cold War mindset. You can read it in a couple of hours – so you should read it twice...

Washington Times / UPIRobb correctly finds the antidote to 4GW not in Soviet-style state structures such as the Department of Homeland Security, but in decentralization -- William Lind (the father of 4th generation warfare).

Robert PatersonHaving painted a crystal clear picture of how a war of networks is playing out, he comes to an astonishing conclusion that I hope he fills out in his next book.

The Daily DishJohn Robb of Global Guerrillas has written the most important book of the year, Brave New War. - Daily Dish (The Atlantic)

Simulated LaughterWell-written. Brave New War reads more like an action novel than a ponderous policy book. - Adam Elkus

FutureJackedGo buy a copy of this book. Now. If you are low on cash, skip a few lunches and save up the cash. It is worth it. - Michael Flagg

ZenPunditThe second audience is composed of everyone else. Brave New War is simply going to blow them away. - Mark Safranski

Haft of the SpearThere aren’t a lot of books that make me recall a 12-year-old self aching for the next issue of The Invincible Iron Man to hit the shelves. Well done.
- Michael Tanji

Ed ConeHis book posits an Army of Davids -- with the traditional nation state in the role of Goliath. - Ed Cone (Ziff Davis)

Shloky.comThis is the first real text on next generation warfare designed for the general population and it sets the bar high for following acts. It is smart, it is a short read, and it will change your thinking. - Shlok Vaidya

Politics in the ZerosI suggest this is something Lefties need to start thinking about now, as that decentralized world is coming. - Bob Morris